Under RTI reporting, employers must close the previous tax year by 19 April by indicating on their final FPS or EPS that this is their final submission for the year.
Corrections for the previous can be made after the 19 April by submitting an Earlier Year Update (EYU) where, despite what was originally said, the employer must advise the difference between the figures already submitted and what the figures should have been.
In their February Employer Bulletin No58, HMRC have clarified a change in the rules where the employer has to report negative NI figures on the EYU.
When employers submit an EYU with a negative amount of employee National Insurance contributions (NICs), employers have to indicate whether they have refunded NICs to their employees. This is done by setting the NIC refund indicator to either ‘Yes’ or ‘No’.
The circumstances in which the indicator is set to ‘Yes’ are changing. From April 2016 when an EYU is submitted with a negative amount of employee NICs there will be two circumstances when the NIC refund indicator should be set to ‘Yes’.
If there is an overpayment of employee NICs that has been refunded to the employee, or to confirm that the EYU is to amend a previous submission but no refund of employee NICs is due.An example of when the second condition would apply would be where the final FPS for a previous tax year showed year to date employee NICs of £1,100. But it should have been £1,000 (and only £1,000 was deducted from the employee). The employer then discovers the mistake after the 19 April 2016 so the correction cannot be reported on an FPS. Instead, an EYU must be submitted showing employee NICs of minus £100. There is no refund due to the employee because this is a clerical amendment. To confirm that this is a clerical amendment and that no refund is due to be paid to the employee, the employer should complete the NIC refund indicator with ‘Yes’.
The guidance on when to set the NICs refund indicator to ‘No’ remains unchanged and should only be used if there is an overpayment of employee NICs that hasn’t been refunded to the employee. It is important to set the NIC refund indicator correctly as this could have an impact on the employer charge.
Further information can be found on HMRC’s guidance: Correcting payroll errors which will be updated shortly to incorporate the changes coming in from April.
